Chalco first half profit falls on higher costs, lower aluminum prices

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BEIJING (Reuters) - Aluminum Corp of China Ltd, known as Chalco, said on Tuesday its net profit fell by 14.1% year-on-year in the first half of 2019 as higher costs offset an increase in revenue.

Beijing-based Chalco, a unit of state-owned aluminum producer Chinalco, said net income came in at 705.8 million yuan ($99.51 million) in January-June, down from a restated figure of 821.6 million a year earlier, it said in a statement to the Shanghai Stock Exchange.

In the second quarter alone, Chalco's net profit was 260.8 million yuan, according to Reuters calculations, down 52.7% from a year earlier, while revenue was up 11.3% year on year.

"Due to the trade friction between China and the United States, global economic growth slowed down, the manufacturing industry was depressed and the consumption market was sluggish," weighing on aluminum prices, Chalco said in remarks accompanying its first-half earnings.

It noted benchmark three-month London aluminum had averaged 16.3% lower year on year at $1,849 a tonne in the reporting period, while prices for raw material alumina, which Chalco also produces, had fallen after the United States lifted sanctions on Rusal and Norsk Hydro's Alunorte alumina plant in Brazil restarted.

Meanwhile, Chalco's operating costs increased by 16.7% year on year to 88.5 billion yuan in the first six months of 2019, partly due to higher freight costs after importing 1.85 million tonnes more coal, which is used to generate electricity for the energy-intensive aluminum smelting process.

The company also faced higher management expenses after missing out on the special payments for "zombie" enterprises, or unprofitable and indebted state-run firms, that it received a year earlier.

Chalco's privately held rival, China Hongqiao Group boosted first-half profit by 37.3% year on year to 2.48 billion yuan but said its 2019 aluminum production would be up to 300,000 tonnes lower than previously guided due to recent flooding.

Chalco did not provide first-half production data on Tuesday but said product output "grew steadily".